Learn To Trade Crypto (45)

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Updated: 09 September 2020

Since the release of Bitcoin back in 2009, the cryptocurrency market has exploded into life. Today, there are more than 5,000 cryptocurrencies (or altcoins) on the market worth over $150 billion. Over the years, stories have emerged of intrepid traders who wandered into this emerging market and found incredible success. Today, their success attracts like-minded traders who are keen to author their own success stories. Here at AskTraders, you can learn to trade crypto safely before entering into this volatile and unpredictable market. Learn what cryptocurrencies are and how you can trade them. Plus, discover expert trading strategies and top tips to prepare yourself before you set out on your journey to cryptocurrency trading success.

For newer traders, a cryptocurrency can be thought of as a virtual currency which provides consumers and investors with an alternative to traditional fiat currencies. Cryptocurrencies are secured using a technology called “cryptography,” so it is essentially impossible for anyone to re-use cryptocurrencies or make counterfeit versions of these assets for use anywhere in the market. Most cryptocurrencies operate as part of a decentralized network that uses blockchain technology, which is a distributed financial ledger that is run through a disparate computer network. Another unique feature of cryptocurrency as a market sector is that digital assets are not issued or regulated based on the authority of any central government.  Ultimately, this means cryptocurrencies are almost immune to government manipulation or interference.

Trading in Cryptocurrencies

Crypto traders are able to take all of this information and construct trading positions that are likely to benefit from upcoming price trends in the market. In this sense, cryptocurrencies are no different from any other market asset in that “buying low and selling high” is the goal of most active traders. Bitcoin was the first blockchain-based cryptocurrency to rise in popularity but this does not necessarily mean that this will continue to be the case in the future. Crypto traders that believe the price of a cryptocurrency will rise in the future can buy the asset using a crypto broker trading platform using a “long” position. If market valuations rise in the future, crypto traders can close the position and collect profits. Conversely, crypto traders can use “short” positions to sell digital currencies and profits can be achieved if the market valuations begin to decline.

Cryptocurrencies have tremendous promise in terms of the ways these assets may be able to disrupt and innovate within a wide variety of industries. Cryptocurrencies can make it easier to complete monetary exchanges between two parties (located anywhere in the world) without a third-party entity such as a credit card company or a bank. Instead, cryptocurrency exchange is secured via internal mechanisms and this makes digital currency safe from price manipulation or other inefficiencies in the market. Remember, traditional asset classes are vulnerable in many of these areas, so many expert crypto traders have explained that cryptocurrency instruments might be some of the most secure assets anywhere in the market.

Potential Risks and Disadvantages

Price valuations in cryptocurrencies are based on the market’s supply and demand levels, so the rate at which cryptocurrencies can be traded could fluctuate wildly if broader volatility is present in other asset classes. Many cryptocurrencies are designed to ensure a certain level of scarcity but this can also lead to low-liquidity levels for cryptocurrency traders. For these reasons, crypto traders tend to use aggressive strategies that are often primarily based on technical analysis. This is important because cryptocurrencies can become quite volatile with little notice and traders have already seen this in cryptocurrency history. Bitcoin valuations reached record highs when the digital currency rose above $19,000 versus the U.S. dollar but then markets quickly reversed and valuations fell by roughly $7,000 during the next two months. Of course, the effects of this dramatic move remained firmly in the minds of many traditional market investors that began to view cryptocurrencies as volatile and unnecessarily risky.

Of course, this is why some investors began using phrases like “speculative bubble” or “trading fad” in conjunction with cryptocurrency trading. However, market trends have proven to be quite stable in the periods that have followed and there is little reason to believe that this will change in the future. For traders, many of the risks that are related to elevated potential for volatility can be mitigated using trading orders that are commonly available in most brokerage trading stations. Specifically, stop-loss orders are able to close a trade when certain price levels are reached and this can help to prevent against excessive losses. Crypto traders are also able to take advantage of higher leverage levels when compared to traditional asset classes (such as stocks or bonds), so this means cryptocurrency trading strategies contain an incredible potential for upside when positions are structured properly.

Crypto trading strategies are often based on the market’s underlying trend momentum, which is not surprising given the strong moves (both bullish and bearish) that have characterized the cryptocurrency markets throughout its history. Competing digital currencies enter the market all the time, so crypto traders should continue to have plenty of new assets to trade in the years ahead. Currently, some of the most important cryptocurrencies include Ethereum and Litecoin, so there are already several different ways for market traders to gain exposure to cryptocurrency assets. Crypto market brokers compete for trader clientele and this has helped to drive down trading costs, so these are all added advantages for crypto traders. Additionally, sophisticated software analysis tools can make it much easier to access cryptocurrencies in an efficient manner.

Cryptocurrencies are semi-anonymous by their very nature, so consumers attracted to the lack of governmental regulation and control may continue to drive demand for digital currency assets. Market traders can capitalize on these trends through market positions that anticipated the net major trend in cryptocurrency markets. Despite prior misconceptions, cryptocurrency trading is completely safe and the proper investment education can help crypto traders produce incredible gains over time. For these reasons, crypto traders can get started while the industry is still in its infancy and use expert strategy tutorials as a way of identifying new trading opportunities and accumulating significant gains in the process.